⋆ ⋆ ⋆
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ECS3702: International Trade
May/June Examination 2026 — Comprehensive Revision Guide
(Based on May/June 2024 & May/June 2023 Past Papers)
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
• Economics – International Trade •
• Exam Revision Guide
ECS3702
Module Code:
International Trade
Module Name:
May/June Examination 2026
Paper / Exam:
May/June 2023 - May/June 2025
Papers Covered:
100
Total Marks:
2 Hours
Duration:
Understand the models, draw the diagrams, and apply the theory. Rote memorisa-
tion alone will not earn marks in this module.
⋆ Exam Revision Notes | ECS3702 | 2026
,ECS3702 | Exam Revision International Trade – May/June 2026
PAPER 1: MAY/JUNE 2024
International Trade — ECS3702 — Total: 100 Marks
Page 2 of 22 ⋆
,ECS3702 | Exam Revision International Trade – May/June 2026
Question 1 [25 marks]
(a) [10 marks]
Question: Using a production possibility frontier (PPF) and community indifference
curves, explain with the aid of a clearly labelled diagram how two nations can gain from
trade under increasing opportunity costs. Distinguish between gains from exchange and
gains from specialisation in your answer.
Answer: Gains from trade arise when a country opens up to international trade and
is able to reach a higher community indifference curve (CIC) than it could achieve under
autarky (no trade).
! Key Concept
Production Possibility Frontier (PPF): Shows the maximum combinations of
two goods (X and Y) a nation can produce given its factor endowments and tech-
nology. Under increasing opportunity costs, the PPF is concave (bowed outward)
because resources are not perfectly substitutable between industries.
Community Indifference Curve (CIC): Shows combinations of two goods
that yield equal satisfaction to the community as a whole. Higher CICs (further
from origin) represent greater welfare. CICs are convex to the origin and must not
cross.
Diagram Setup:
Page 3 of 22 ⋆
, ECS3702 | Exam Revision International Trade – May/June 2026
Good Y
C (consumption)
gains
A (autarky)
E (production)
CIC2
CIC1 PW
PPF
Good X
Step-by-step explanation:
• Autarky: Nation 1 produces and consumes at point A, where the PPF is tangent
to CIC1 . The slope of CIC1 at A equals the marginal rate of transformation
(MRT) – the domestic relative price.
• Opening to trade: When trade opens, the world relative price line PW (terms of
trade) is introduced. If PW ̸= the domestic autarky price, the nation can gain by
shifting production.
• Production shift to E: The nation shifts production to point E, where the PPF is
tangent to the world price line PW . This is the new production point under trade.
• Consumption at C: By trading along PW (exporting X, importing Y), the nation
reaches consumption point C on CIC2 – a higher indifference curve.
Gains from Exchange vs. Gains from Specialisation:
• Gains from exchange arise even when a nation cannot or does not specialise. If
production stays at A but the nation trades along PW , it can still reach a higher
CIC by exchanging goods at world prices more favourable than domestic prices.
Page 4 of 22 ⋆
]]
ECS3702: International Trade
May/June Examination 2026 — Comprehensive Revision Guide
(Based on May/June 2024 & May/June 2023 Past Papers)
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
• Economics – International Trade •
• Exam Revision Guide
ECS3702
Module Code:
International Trade
Module Name:
May/June Examination 2026
Paper / Exam:
May/June 2023 - May/June 2025
Papers Covered:
100
Total Marks:
2 Hours
Duration:
Understand the models, draw the diagrams, and apply the theory. Rote memorisa-
tion alone will not earn marks in this module.
⋆ Exam Revision Notes | ECS3702 | 2026
,ECS3702 | Exam Revision International Trade – May/June 2026
PAPER 1: MAY/JUNE 2024
International Trade — ECS3702 — Total: 100 Marks
Page 2 of 22 ⋆
,ECS3702 | Exam Revision International Trade – May/June 2026
Question 1 [25 marks]
(a) [10 marks]
Question: Using a production possibility frontier (PPF) and community indifference
curves, explain with the aid of a clearly labelled diagram how two nations can gain from
trade under increasing opportunity costs. Distinguish between gains from exchange and
gains from specialisation in your answer.
Answer: Gains from trade arise when a country opens up to international trade and
is able to reach a higher community indifference curve (CIC) than it could achieve under
autarky (no trade).
! Key Concept
Production Possibility Frontier (PPF): Shows the maximum combinations of
two goods (X and Y) a nation can produce given its factor endowments and tech-
nology. Under increasing opportunity costs, the PPF is concave (bowed outward)
because resources are not perfectly substitutable between industries.
Community Indifference Curve (CIC): Shows combinations of two goods
that yield equal satisfaction to the community as a whole. Higher CICs (further
from origin) represent greater welfare. CICs are convex to the origin and must not
cross.
Diagram Setup:
Page 3 of 22 ⋆
, ECS3702 | Exam Revision International Trade – May/June 2026
Good Y
C (consumption)
gains
A (autarky)
E (production)
CIC2
CIC1 PW
PPF
Good X
Step-by-step explanation:
• Autarky: Nation 1 produces and consumes at point A, where the PPF is tangent
to CIC1 . The slope of CIC1 at A equals the marginal rate of transformation
(MRT) – the domestic relative price.
• Opening to trade: When trade opens, the world relative price line PW (terms of
trade) is introduced. If PW ̸= the domestic autarky price, the nation can gain by
shifting production.
• Production shift to E: The nation shifts production to point E, where the PPF is
tangent to the world price line PW . This is the new production point under trade.
• Consumption at C: By trading along PW (exporting X, importing Y), the nation
reaches consumption point C on CIC2 – a higher indifference curve.
Gains from Exchange vs. Gains from Specialisation:
• Gains from exchange arise even when a nation cannot or does not specialise. If
production stays at A but the nation trades along PW , it can still reach a higher
CIC by exchanging goods at world prices more favourable than domestic prices.
Page 4 of 22 ⋆
